Unveiling the diversification capabilities of carbon markets in NFT portfolios

Antonio Díaz, Carlos Esparcia and Diego Huélamo

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: This empirical study investigates the potential of carbon markets in reducing the downside risk of NFT portfolios. Employing a monthly rebalance experiment and considering higher order conditional moments, we dynamically measure the tail risk of NFT portfolios over an out-of-sample period. Our results show that introducing CO2 emission allowance (EUA) futures in NFT portfolios allows for a systematic mitigation of risk via reduction of volatility and kurtosis and steepening of skewness. Empirical evidence also reveals the outperformance of NFT portfolios that include EUA futures.

Keywords: Carbon markets; Co-skewness; Co-kurtosis; Modified vaR; NFT (search for similar items in EconPapers)
JEL-codes: C13 C62 D58 G11 G17 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323010048

DOI: 10.1016/j.frl.2023.104632

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